Dy. Commissioner of Income Tax , Circle-2(2), Hyderabad V. Transmission Corporation of Telangana Limited , Hyderabad

ITA 212/Hyd/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0580 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB-A
• Assessment Year: 2017-2018
• Appeal Filed On: 18-02-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Additional evidence; Revised return; TDS
• Section: 142(1)

Judgement Text

-IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD ‘A’ BENCH, HYDERABAD. BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA No.212/Hyd/2020 (Assessment Year : 2017-18) Dy. Commissioner of Income Tax, Circle 2(2), Hyderabad. .....Appellant. Vs. M/s. Transmission Corporation of Telanagana Ltd., Hyderabad. PAN AAFCT0166J .....Respondent. C.O. No.7/Hyd/2020 (In ITA No.212/Hyd/2020) Assessment Year : 2017-18 M/s. Transmission Corporation of Telanagana Ltd., Hyderabad. .....Cross Objector. Vs. Dy. Commissioner of Income Tax, Circle 2(2), Hyderabad. .....Respondent. Assessee By : Shri M. Chandramouleswar Rao, C.A. Revenue By : Shri Rajendra Kumar. (CIT-D.R.) Date of Hearing : 25.05.2022. Date of Pronouncement : 31.05.2022. O R D E R Per Shri Rama Kanta Panda, A.M. : This appeal filed by the revenue is directed against the order dt.27.12.2019 of the learned Commissioner of 2 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 Income Tax (Appeals)-2, Hyderabad relating to Assessment Year 2017-18. The assessee has filed C.O. against the appeal filed by the revenue. For the sake of convenience, these were heard together and are being disposed of by this common order. ITA No.212/Hyd/2020 2. Facts of the case, in brief, are that the assessee is a limited company and filed its Return of Income for the Assessment Year 2017-18 on 30.10.2017 electronically declaring a total income of Rs.19,99,81,170. Subsequently, the assessee filed revised Return of Income on 31.12.2018 declaring a total income of Rs.27,17,86,410 under normal provisions and Rs.331,50,98,943 under MAT. The return was selected for scrutiny under CASS. Notices u/s.143(2) and 142(1) were issued and duly served on the assessee requiring the assessee to furnish various details. 2.1 During the course of assessment proceedings, the Assessing Officer noted that the assessee was executing the 3 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 Lift Irrigation Scheme (LIS) for the Government of Andhra Pradesh from F.Y. 2007-08 onwards. As on 31.3.2017, the assessee was executing projects under LIS at various places in the erstwhile combined state of Andhra Pradesh. For each project, on assessee's submission of the cost estimate the Government of A.P. / Telangana releases the payment (grants) and the assessee keeps the unutilized grants as fixed deposits with Banks and earns interest thereon. Further he observed that the assessee has shown Rs.119.31 Crores as ‘Interest payable to Government Account’. He asked the assessee to furnish interest receipts and payments and explain as to why the interest on deposits accrued during the year should not be treated as income of the assessee. The assessee was also asked to explain the position on TDS claimed on the income which was not offered for taxation. 3. In response to the same, the assessee vide letter dt.16.07.2019 submitted its response which has been 4 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 reproduced by the Assessing Officer in the body of the assessment order as under : 1. "Government of Andhra Pradesh, as a policy has taken up Lift Irrigation Schemes and directed APTRANSCO for construction Of Lines/Sub-Stations for extension of power supply to various Lift Irrigation Scheme Projects. Accordingly, the funds were released to APTRANSCO from time to time. Since, the works are under execution, the un-utilized funds to the tune of Rs. 2053 crores, were kept as Inter Corporate Deposits With APDISCOMs at an interest rate equivalent to SBH's base rate. A against the ICDs of Rs. 2053.00 crores, APDISCOMs have issued bonds of Rs. 387.00 crores to APTRANSCO in partial discharge of liability, leaving a balance of Rs. 1666.00 crore. 2. Consequent to bifurcation of Andhra Pradesh State as per AP Reorganisation Act, 2014, Inter Corporate Deposits (ICSs) of Rs.986.48 crores (Out of RS.1660.00 in combined APTRANSCO) were allocated to the Company, and bonds of Rs.239.67 crores (Out of Rs.387.00 crores in combined APTRANSCO) were allocated to the Company. 3. Since, ICDs kept with DISCOMs are against the un-utilized Lift Irrigation Scheme funds of the State Government which were released for specific purpose and were not at the disposal of the Company, the interest income of Rs.119,31,85,221/- earned/accrued during FY 2016- 17 was credited to "payable to Government Account". However, the Assessing Officer was not satisfied with the arguments advanced by the assessee. He observed that the assessee was claiming TDS credit. He therefore asked the assessee to explain as to whether the assessee has claimed TDS credit on such deposits. It was explained by the assessee that it has received an amount of 5 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 Rs.119,31,85,221 as interest on LIS and has claimed TDS credit on the above interest. 4. The Assessing Officer observed from the various submissions made by the assessee that the assessee was claiming the TDS credit on the interest accrued on deposits on one hand and on the other hand, not offered the interest income which was related to the TDS credit. Therefore the assessee was grossly violating the matching concept. According to the Assessing Officer the interest payable of Rs.119,31,85,221 is nothing but the interest earned by the assessee on the deposit/investment made with Discom and the assessee, instead of recognizing the same as revenue by crediting it to P & L account, credited the same as payable to Government and showing as liability which is not in order. He noted that there is uncertainty about the payment of interest to the Government. The assessee never refunded any excess grant or interest on deposit to the Government. Therefore the assessee has neither recognizing the interest receipts as revenue nor refunding 6 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 the same to Government of A.P. / Telangana. Since the assessee, according to the Assessing Officer, has earned interest from deposits made with Discom and instead of recognizing the same as revenue had credited to payable to Government account and did not offer to tax but claimed the TDS credit, the Assessing Officer held that the action of the assessee is self-defeating and contradictory. Further provision of section 199 are clearly applicable for allowing TDS credit according to which the tax credit should be given only when the assessee offers corresponding income for tax purpose. Since the assessee in the instant case has failed to offer the interest income on deposits from Government for LIS account, the Assessing Officer made addition of Rs.119,31,85,221 to the total income of the assessee. 5. In appeal, the ld. CIT (Appeals) following the decision of the Tribunal in assessee's own case for Assessment Years 2008-09 to 2013-14 and for Assessment Year 2016-17, allowed the claim of the assessee by observing as under : “6. The Decision : The ground Nos.2 & 3 pertain to addition made of Rs.119,31,85,221/- being interest earned by the appellant on the deposit / investments made from unutilized Lift Irrigation Scheme funds. Similar issue has come up before the ITAT in the case of M/s. Transmission 7 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 8 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 9 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 10 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 6. Aggrieved with such order of the learned CIT (Appeals), the revenue is in appeal before the Tribunal by raising the following grounds : “1. Whether in the facts and circumstances of the case, CIT (Appeals) is correct in law in holding that the 11 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 interest earned on FDs by the assessee on grants issued by Government for execution of projects is not taxable ? 2. The appellant craves leave to add, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary. 3. Any other ground that may urged at the time of hearing.” 7. Learned Departmental Representative strongly challenged the order of the learned CIT (Appeals) in allowing the claim of the assessee. He submitted that the interest payable of Rs.119,31,85,221 is nothing but the interest earned by the assessee on the deposits / investments made with Discom and there is no proof that the same is payable to Government account which was shown as a liability. Further, without offering corresponding income to tax, the assessee cannot claim TDS credit. He submitted that there is no documentary evidence that the assessee has ever refunded any excess grant or interest earned on the deposits to the Government since the assessee is neither recognizing the interest receipt as revenue nor refunding 12 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 the same to the Government of A.P. / Telangana and learned CIT (Appeals) was not justified in deleting the addition made by the Assessing Officer. 8. The learned counsel for the assessee, on the other hand, heavily relied on the order of the learned CIT (Appeals) who had followed the decision of the Tribunal in assessee's own case for Assessment Years 2008-09 to 2013- 14 and subsequently for Assessment Year 2016-17. He submitted that the Tribunal in the meantime for the Assessment Year 2015-16 has also dismissed the appeal filed by the revenue. 8.1 The learned counsel for the assessee in his alternate contention filed certain additional evidences with an application to accept the same. The contents of the petition for filing the additional evidences read as under : “ PETITION FOR FILING ADDITIONAL EVIDENCE The Respondent, Assessee humbly submit as follows: - 13 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 1) That in the above-mentioned Revenue appeal and in Cross objections filed by it, it could not file- (a) Letter No: 593/Budget.A2/2022-1 Dated 12-05-2022 received from the office of the Special Chief Secretary to Government of Telangana, Energy (Budget. A2) Department, since the same is received only very recently and therefore, could not be filed earlier before your Honours. We further submit that for the same reason this letter could not be filed before the Assessing Officer or before the Commissioner of Income Tax (Appeals) during the respective proceeds. (b) Other letters from page numbers (2) to (10) could not be filed before the lower authorities of before the Hon'ble Income Tax Appellate Tribunal in the present proceedings due to the reason that the same pertain to A.P Transco and came to our knowledge now only. The Present Respondent Company has shared the Lift Irrigation Scheme (LIS) Capital Grants on the division of united State of Andhra Pradesh into State of Telangana and residuary State of Andhra Pradesh and the terms and conditions of utilization of scheme funds and interest earned on unspent balances are common for both the states and such conditions are still continuing in their application even in the case of the present Respondent Assessee Company. 2) That, the additional evidence is required to be filed for the first time before the Hon'ble tribunal due to the fact that the same are received/ noticed only now and they could not be filed earlier before the AD or before the CIT(A). This additional evidence are necessary for deciding the true nature of the interest amount earned/accrued on the unspent LIS fund balances and to decide the owner for such interest income and Fund as a whole. 3) The Hon’ble Bench is most humbly prayed to admit the additional evidence now filed herewith and to consider the same in the dispensation of justice and oblige.” 14 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 8.2 He accordingly submitted that these additional evidences which go to the root of the matter should be admitted. 9. The learned Departmental Representative in his rejoinder submitted that these additional evidences are being filed before the Tribunal for the first time and therefore the matter should be restored to the file of Assessing Officer to go through the same and decide the issue afresh. 10. We have heard the rival arguments made by both the sides, perused the orders of the authorities below and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find that the Assessing Officer in the instant case made addition of Rs.119,31,85,221 being the interest received by the assessee on deposit / investment made with Discoms on the ground that the assessee is showing the same as payable to the Government of A.P. / Telangana but has not 15 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 refunded the same and has also not recognized the same as revenue receipt but at the same time claimed the TDS credit. We find the learned CIT (Appeals) following the orders of the Tribunal in assessee's own case for the Assessment Years 2008-09 to 2013-14 and for 2016-17 deleted the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. We find the learned counsel for the assessee filed certain additional evidences during the course of hearing before the Tribunal to substantiate its case which were never filed before the lower authorities. Since these additional evidences go to the root of the matter for deciding the issue, therefore, considering the totality of the facts of the case and in the interest of justice we admit the same and deem it proper to remit the issue to the file of Assessing Officer with a direction to adjudicate the issue afresh. Needless to say, the Assessing Officer shall provide due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct 16 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 accordingly. The grounds raised by the revenue are accordingly allowed for statistical purposes. C.O. No.7/Hyd/2020 11. The assessee in its cross objection has basically supported the order of the learned CIT (Appeals). Since we have restored the issue to the file of Assessing Officer, the C.O. filed by the assessee becomes infructuous. Accordingly, the same is dismissed. 12. In the result, the appeal of the revenue is allowed for statistical purposes and the C.O. filed by the assessee is dismissed. Order pronounced in the open court on 31st May, 2022. Sd/- Sd/- (K NARASIMHA CHARY) (RAMA KANTA PANDA) Judicial Member Accountant Member Hyderabad, Dt. 31.05.2022. * Reddy gp 17 ITA No.212/Hyd/2020 & C.O. No.7/Hyd/2020 Copy to : 1. M/s. Transmission Corporation of Telangana Ltd., Room No.513, 5 th Floor, Signature Towers, Opp. Botanical Garden, Kondapur, Hyderabad. 2. DCIT, Circle 2(2), Hyderabad. 3. Pr. C I T-2, Hyderabad. 4. CIT(Appeals)-2, Hyderabad. 5. DR, ITAT, Hyderabad. 6. Guard File. By Order Sr. Pvt. Secretary, ITAT, Hyderabad.